Wences was looking forward
to his breakfast at Woodside
Bakery and Café, a favorite
spot for Silicon Valley deal
making that provided a bit
more seclusion than the
restaurants down in Palo
Alto.
The man waiting for him
inside was often referred to as
the best-connected person in
the Valley, and not just
because he had cofounded
LinkedIn,
the
business-
networking
site.
Reid
Hoffman’s girth and bearing
hinted at his larger-than-life
character. After studying at
Oxford, on an elite Marshall
Scholarship, Hoffman had
been brought in by Pete Thiel
to help build PayPal—Thiel
called him the “firefighter-in-
chief.”
Hoffman
later
introduced Thiel to Mark
Zuckerberg, an introduction
that led to Thiel’s making the
first major investment in
Facebook. By that point,
Hoffman had already begun
building LinkedIn with some
colleagues from an earlier
startup. When Wences first
met Hoffman, not long after
arriving in Silicon Valley,
Hoffman was looking for new
investments and serving on
the boards of startups. The
breakfast at Woodside Café
was one of their periodic
check-ins.
Wences
was
finalizing the investments in
his new company, Xapo, and
was eager to tell Hoffman
about his plans.
Wences
knew
that
Hoffman had first gotten
hooked on Bitcoin by Charlie
Songhurst, who had, in turn,
gotten hooked on Bitcoin by
Wences at the Allen & Co.
event in 2013. Hoffman, an
expert on social networks,
had
been
captivated
by
Songhurst’s arguments about
the power of the incentives
built into Bitcoin—primarily
through the mining process—
that encouraged new users to
join
the
decentralized
network
while
also
encouraging powerful miners
to do what was best for the
system so as not to see their
holdings lose value.
“That’s actually super
important,” Hoffman would
say later. “That makes it less
of
a
pure
technological
marvel and more of a
potential social movement.”
But
Hoffman
had
remained skeptical and was
particularly put off by the
suggestion that Bitcoin would
replace
credit
cards—the
possibility that all the bank
research reports were talking
about. Credit cards seemed to
work
pretty
well
in
Hoffman’s
estimation.
Despite the security risks and
costs to merchants, he didn’t
see too many consumers
complaining about their credit
cards failing them. If that
wouldn’t get people using
this new kind of network,
Hoffman
wondered,
what
would?
Hoffman
had
finally
gotten a satisfying answer to
this at a dinner with Wences
and David Marcus and a few
other Valley power players
late in 2013. Wences agreed
with Hoffman that Bitcoin
was unlikely to catch on as a
payment
method
anytime
soon. But for now, Wences
believed that Bitcoin would
first gain popularity as a
globally
available
asset,
similar to gold. Like gold,
which was also not used in
everyday
transactions,
Bitcoin’s value was as a
digital asset where people
could store wealth.
This was enough to get
Hoffman to go home from
that dinner and ask his wealth
adviser—the Valley’s most
prominent money manager,
Divesh Makan—to buy some
Bitcoins for his portfolio.
When Wences sat down for
breakfast with Hoffman at
Woodside Café in January,
Wences told him about the
progress he was making with
Xapo.
“Just to be clear, I’d be
super interested in investing,”
Hoffman told Wences.
Wences paused, a bit
chagrined.
“I wish you’d told me that
the last time we talked,” he
said.
“You told me you weren’t
interested
in
venture
investing,”
Hoffman
shot
back.
Wences explained that
things had changed since they
last talked, and that he had
decided to take on investors
and had struck a deal with
Benchmark Capital.
“I just don’t think I can
include you in that,” Wences
said. “It wouldn’t be the
honorable thing to do.”
Hoffman was not so
easily
deterred.
He
told
Wences he was going home
to figure out a way they could
make it work. Wences said he
would do the same.
Hoffman’s
newfound
enthusiasm was part of a
broader passion sweeping
Silicon Valley in early 2014.
While Wall Street research
reports were talking about the
possibility of a new payment
system, the best minds in the
Valley were thinking in much
more ambitious terms after
looking deeply at the code
underlying Bitcoin. These
views were crystallized, and
projected to a much broader
audience,
the
day
after
Wences’s
breakfast
with
Hoffman,
when
Marc
Andreessen, cofounder of the
investment firm that had put
$25 million into Coinbase,
published a lengthy cri de
coeur on the New York Times
website, explaining what had
the Valley so worked up.
“The gulf between what
the press and many regular
people believe Bitcoin is, and
what a growing critical mass
of
technologists
believe
Bitcoin
is,
remains
enormous,”
Andreessen
explained.
Andreessen’s list of the
potential
uses
for
the
technology was lengthy. It
was an improvement on
existing payment networks,
owing to its security and low
fees, but it was also a new
way for migrants to move
money
internationally,
as
well as a way to provide
financial services to people
whom banks had left behind.
Like many Valley firms,
Andreessen’s was thinking
about intelligent robots, and
Bitcoin seemed like a perfect
medium of exchange for two
machines that needed to pay
each other for services.
Beyond all that, though,
the
decentralized
ledger
underlying Bitcoin was a
fundamentally new kind of
network—like the Internet—
with possibilities that still
hadn’t been dreamed up,
Andreessen said. He went on:
Far from a mere
libertarian fairy tale or
a simple Silicon
Valley exercise in
hype, Bitcoin offers a
sweeping vista of
opportunity to
reimagine how the